IPAA OGIS San Francisco September 26, 2011 Company by the Numbers - - PowerPoint PPT Presentation

IPAA OGIS San Francisco

September 26, 2011

1

Company by the Numbers

(1) Latest twelve months ended June 30, 2011. (2) Includes acquisition-related CAPEX. (3) Data as of 12/31/10 for offshore properties, pro forma for the Fairway field acquisition. Producing fields include offshore fields only. (4) Proved reserves at June 30, 2011, pro forma for 54.5 Bcfe related to the acquisition of the Fairway field from Shell. (5) Most recent 31-day average production, inclusive of Fairway field acquisition and production downtime associated with Tropical Storm Lee.

Reserve Data (4) PF 6/30/2011 2010 2009 Proved Reserves (Bcfe) 741 485 371 Proved Developed % 65 % 81 % 76 % Oil and Liquids % 57 % 47 % 55 % 31-Day Average Production (5) Average Daily Production (MMcfe) 284 +/- Oil and Liquids % 44 % Operated Production % (net) 82 % Key Financials ($ in MMs) LTM (1) 2010 2009 Revenue $820 $706 $611 Adjusted EBITDA $549 $450 $341 CAPEX (2) $692 $416 $276 Field Statistics (3) # of Producing Fields w/WI 67 Offshore Acreage (Gross/Net) 854,000 / 553,000 % Held-by-Production 82 % Onshore Net Acreage ~177,000

2

Key Investment Considerations

• Strong operating track record with 27+ year history of

success in the Gulf of Mexico

• Recent movement onshore via Permian Basin Property

acquisition

• Gulf Coast oil production generating premiums to market and

strong cash flow

• Strong liquidity level and cash flow generation
• Pro forma proved reserves continue to increase and are 57%
• il and liquids
• Proven, experienced management team whose interests align

with all stakeholders (CEO owns over 50% of stock)

3

Company Overview

• Large acreage position in the Gulf of Mexico primarily held by

production

• Proved reserves on a pro forma basis at historic high and more
• ily
• Permian Basin Properties acquired on May 11, 2011 create next

area of growth

– 91% oil and liquids – Longer-lived proved reserves – Provides “predictable growth” opportunities

• Strong cash flow

– 2010 cash flow from operating activities of $465 million – LTM ended June 30, 2011 Adjusted EBITDA of $549 million

• Active 2011 drilling and acquisition program

4

Company Operations

(1) Includes impact of Fairway acquisition.

Permian Basin

• Proved Reserves: 175 Bcfe /

29 MMBoe

• Acreage: ~30,000 Net
• ~5% of Production

GOM Deepwater

• Proved Reserves: 168 Bcfe /

28 MMBoe

• Acreage: 137,792 Gross /

93,670 Net

• ~25% of Production

GOM Shelf (1)

• Proved Reserves: 397 Bcfe /

66 MMBoe

• Acreage: 715,981 Gross /

459,542 Net

• ~69% of Production

Gulf Coast

5

Strategic Plan

• Drill and develop our Permian Basin Properties
• Expand acreage positions onshore
• Continue to exploit our large GOM acreage position
• Continue to pursue GOM acquisition opportunities, especially

the deepwater

• Pursue active and balanced drilling program to increase

reserves and production

• Take prudent and managed risk

6

2011 Plan Yielding Growth

• Expanding into new areas onshore, including Permian Basin, East

Texas and Gulf Coast

• Recent acquisitions have provided significant reserve increases and

upside opportunities

• Oil and liquids now represent 57% of total proved reserves
• During the first half of 2011, we participated in the drilling of 10
• nshore wells and 3 offshore wells, all of which were successful
• Amounts spent for capital expenditures and acquisitions through

June 30, 2011 of $482 million

– $224 million remaining of the original $310 million CAPEX budget for 2011 (original budget excluding acquisitions)

• Drilling plan for 2011 has more than 50 wells between onshore and
• ffshore including:

– 10 wells planned for the GOM (4 completed, 6 remaining) – 42 to 48 onshore wells

Onshore

8

West Texas Permian Basin Overview

• Next growth phase for the

Company

• Currently in several distinct

areas

• Current total net acreage of

~30,000

• Continue to expand acreage

position

• 6 drilling rigs currently

running in Permian Basin

9

Wolfberry West Texas

• Primary focus in the West

Texas Permian Basin is the Wolfberry

• Potential upside includes

20-acre spacing and deeper zones

• Wells drilled to total vertical

depths of 11,000’ to 13,000’

• Horizontal wells planned for

late 2011 and for 2012

10 10

Newly Acquired Assets in West Texas:

Martin, Dawson, Andrews & Gaines Counties

• Acquired 21,400 net acres in

May 2011 for $399.5 million

• Currently producing 2,777 Boe

per day from 90 wells

• Proved reserves of 30 MMBoe

and probable reserves of 25 MMBoe

• EUR of ~100 MBoe net per well

and 40 acre spacing on PUDs

• Days to drill to total depth: 15 to

19 days (average of 17 days)

• Oil and liquids are 91% of

proved reserves

11 11

Permian Basin Acquisition Provides Long-term Growth

• Low risk operations with a multi-year extensive drilling inventory

– 450 to 500 drilling locations identified for future exploration and development – Proved reserves based on 40-acre spacing but nearby operators are using 20- acre spacing while others are drilling horizontal wells – Focused on improving operating efficiency

• Plan for 3 drilling rigs working throughout remainder of 2011

– Primarily targeting the “Wolfberry” trend, but deeper targets have been tested and are producing – 2011 Capital Expenditures between $50 and $60 million – Drilled 14 wells and completed 28 wells since closing in the second quarter – Anticipate drilling a total of 27 to 33 development wells from close to the end of 2011

12 12

Other Permian Basin Activity

• Have acquired approximately

9,100 net acres in Terry County

• Anticipate 2011 drilling to

include 8 to 11 exploratory wells

• Have drilled 2 wells to date and

are currently drilling 3 more in Terry county

• Working interests vary from

35.6% to 80%

13 13

East Texas Activity

• 2 prospective exploratory areas
• 1 area covers approximately

146,000 net acres

• Have drilled 1 well to date and

will possibly drill 2 to 3 more by 2011 year end

• Working interests vary from 35%

to 100%

• W&T is the operator in both

prospective areas

Gulf of Mexico

15

Gulf of Mexico Highlights

• Strong operating track record

– 10 year exploration drilling success rate of 77% and 10 year development drilling success rate of 91% – Proved reserve replacement rate of 231% in 2010 – Excellent safety track record and culture of operating success

• Large acreage position

– Over 850,000 gross acres with more than 80% held by production

• Great history of production and reserves

– Highly prolific with multiple pay zones – Reserves at deeper but virtually untapped zones, significant upside potential – Established infrastructure on shelf

• Attractive reservoir characteristics
• Costs historically adjust quickly to commodity prices due to

shorter contract terms

16 16

Gulf of Mexico Proved Reserve with Geographic Diversification

• 67 fields
• 81% operated
• 853,773 gross acres, 553,212 net acres
• 82% held by production
• Producing 269 MMcfe per day
• 42% oil & liquids / 58% gas

17

Gulf of Mexico Recent Activity

• Integrated two deepwater purchases closed in 2010
• Closed on the acquisition of the Fairway field (offshore

Alabama) and Yellowhammer gas plant in August 2011

• Restored production to the Main Pass 108 Field early in the

2011 second quarter

• Successfully drilled development sidetracks at our MP 108 D-3

and MP 108 D-2 BP1 wells

• Anticipate drilling three more exploratory wells and three more

development wells offshore during the remainder of the year

18 18

Investment Highlights of Fairway Field and Yellowhammer Plant

• Acquired the Fairway field and Yellowhammer gas processing

plant from Shell Offshore, Inc. on August 10, 2011 for $36. 7 million

– Completes the Shell transaction from 2010

• Fairway field is south of Mobile, Alabama in water depths of 20

to 30 feet

– W&T is the operator with a 64.3% working interest

• The Yellowhammer plant is located onshore in Alabama about

17 miles northwest of the Fairway Field

• Fairway has proved reserves of 54.5 Bcfe, as of June 30, 2011,

92% of which is PDP

– 39.4 Bcf of natural gas; 2.5 MMBbls of NGLs

• Currently producing 26.8 MMcfe per day, net

19 19

Concentrated Operations in Recently Acquired GOM Fields and Focus Areas

20 20

Offshore 2011 Drilling Program

MP 108 D-3 ST & MP 108 D-2 ST BP01 WI: 100% Shelf (Both Drilled and Successful) SS 349 A-1 ST #4 WI: 100% Shelf SS 349 A-11 ST WI: 100% Shelf MP 108 #8 WI: 100% Shelf

Exploration Development

MP 108 B1ST WI: 100% Shelf MC 243 A-4 WI: 100% Deepwater ST 41 E-1 ST WI: 40% Shelf MP 180 A-2 WI: 100% Shelf (Drilled and successful) ST 315 A-3 ST02 WI: 50% Shelf (Drilled and Successful)

Other Operational and Financial Information

Oil 57% Gas 43% PDP 48% PNP 17% PUD 35%

22 22

Proved Reserves – as of June 30, 2011 (Pro Forma) (1)

Reserves by Category

123.4 MMBoe

(740.6 Bcfe)

Product Mix

(1) 2011 Proved reserves include the recently acquired Shell Fairway property.

23 23

Reserve Growth Profile

(1) Midyear 2011 reserves, pro forma for the acquisition of the Fairway property from Shell in August 2011.

227.9 165.8 256.3 317.0 263.3 205.2 229.1 423.6 0.0 200.0 400.0 600.0 800.0 2008 2009 2010 PF 6/30/11

Oil & NGLs (Bcfe) Natural Gas (Bcf)

491.1 485.4 740.6 Bcfe 371.0

(1)

227.9 165.8 256.3 317.0 263.3 205.2 229.1 423.6 0.0 200.0 400.0 600.0 800.0 2008 2009 2010 PF 6/30/11

Oil & NGLs (Bcfe) Natural Gas (Bcf)

491.1 485.4 740.6 Bcfe 371.0

(1)

24 24

Historically Drilled Within Cash Flow

Adjusted EBITDA vs. Capital Expenditures

($ in millions)

Capital expenditures funded largely through internally generated cash flow

(1) Includes the acquisition of West Permian Basin assets in May 2011 and the acquisition of the Fairway property from Shell in August 2011.

$884 $820 $341 $450 $746+ $416 $276 $775 $359 $0 $100 $200 $300 $400 $500 $600 $700 $800 $900 $1,000 2007 2008 2009 2010 2011E

• Adj. EBITDA

CAPEX, Excl. Acquisitions Acquisition CAPEX

$884 $820 $341 $450 $746+ $416 $276 $775 $359 $0 $100 $200 $300 $400 $500 $600 $700 $800 $900 $1,000 2007 2008 2009 2010 2011E

• Adj. EBITDA

CAPEX, Excl. Acquisitions Acquisition CAPEX

25 25

Liquidity Profile

• New four-year revolver with $537.5 million borrowing

base

– Proved reserves for the Permian Basin Properties are not yet included in the borrowing base – We have ~$100 million currently drawn on the revolver

• Net cash provided by operating activities $229.8 million

for the six months ended June 30, 2011

26

Key Investment Considerations

• Strong operating track record with 27+ year history of

success in the Gulf of Mexico

• Recent movement onshore via Permian Basin Property

acquisition

• Gulf Coast oil production generating premiums to market and

strong cash flow

• Strong liquidity level and cash flow generation
• Pro forma proved reserves continue to increase and are 57%
• il and liquids
• Proven, experienced management team whose interests align

with all stakeholders (CEO owns over 50% of stock)

Appendix

28

The following table presents a reconciliation of our consolidated net income to consolidated EBITDA to Adjusted EBITDA:

We define EBITDA as net income (loss) plus income tax expense (benefit), net interest expense (which includes interest income), depreciation, depletion, amortization and accretion and impairment of oil and natural gas properties. Adjusted EBITDA excludes the loss on extinguishment of debt and the unrealized gain or loss related to our derivative contracts. Although not prescribed under GAAP, we believe the presentation of EBITDA and Adjusted EBITDA provide useful information regarding our ability to service debt and fund capital expenditures and they help our investors understand our operating performance and make it easier to compare our results with those of other companies that have different financing, capital and tax structures. EBITDA and Adjusted EBITDA should not be considered in isolation from or as a substitute for net income, as an indication of operating performance or cash flow from operating activities or as a measure of liquidity. EBITDA and Adjusted EBITDA, as we calculate them, may not be comparable to EBITDA and Adjusted EBITDA measures reported by other companies. In addition, EBITDA and Adjusted EBITDA do not represent funds available for discretionary use.

Reconciliation of Net Income to EBITDA

2007 2008 2009 2010 2010 2011 2011 ($ in thousands) Net income (loss) $ 144,300 $ (558,819) $ (187,919) $ 117,892 $ 70,185 $ 73,824 $ 121,531 Income tax expense (benefit) 71,459 (269,663) (74,111) 11,901 7,097 40,019 44,823 Net interest expense 30,684 21,337 39,245 36,996 18,607 18,685 37,074 Depreciation, depletion, amortization and accretion 532,910 521,776 342,537 294,100 145,231 157,462 306,331 Impairment of oil and natural gas properties

• 1,182,758

218,871

• EBITDA

779,353 897,389 338,623 460,889 241,120 289,990 509,759 Adjustments: Unrealized derivatives loss (gain) 37,831 (13,501) 5,370 9,511 (10,370) (1,814) 18,067 Royalty relief recoupment

• (24,881)

(20,097)

• (4,784)

Transportation allowance for

• (5,558)

4,687

• 4,687

Loss on extinguishment of debt 2,806

• 2,926
• 20,663

20,663 Adjusted EBITDA $ 819,990 $ 883,888 $ 341,361 $ 450,206 $ 210,653 $ 308,839 $ 548,392 Twelve Months Ended June 30. Year Ended December 31, Six Months Ended June 30

29 29

2011 Guidance

30

Forward-Looking Statement Disclosure

This presentation, contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act and Section 21E of the Exchange Act. Forward-looking statements give our current expectations or forecasts of future events. They include statements regarding our future operating and financial performance. Although we believe the expectations and forecasts reflected in these and other forward-looking statements are reasonable, we can give no assurance they will prove to have been correct. They can be affected by inaccurate assumptions or by known

• r unknown risks and uncertainties. You should understand that the following important factors, could affect our future results

and could cause those results or other outcomes to differ materially from those expressed or implied in the forward-looking statements relating to: (1) amount, nature and timing of capital expenditures; (2) drilling of wells and other planned exploitation activities; (3) timing and amount of future production of oil and natural gas; (4) increases in production growth and proved reserves; (5) operating costs such as lease operating expenses, administrative costs and other expenses; (6) our future

• perating or financial results; (7) cash flow and anticipated liquidity; (8) our business strategy, including expansion into the

deep shelf and the deepwater of the Gulf of Mexico, and the availability of acquisition opportunities; (9) hedging strategy; (10) exploration and exploitation activities and property acquisitions; (11) marketing of oil and natural gas; (12) governmental and environmental regulation of the oil and gas industry; (13) environmental liabilities relating to potential pollution arising from our

• perations; (14) our level of indebtedness; (15) timing and amount of future dividends; (16) industry competition, conditions,

performance and consolidation; (17) natural events such as severe weather, hurricanes, floods, fire and earthquakes; and (18) availability of drilling rigs and other oil field equipment and services. We caution you not to place undue reliance on these forward-looking statements, which speak only as of the date of this presentation or as of the date of the report or document in which they are contained, and we undertake no obligation to update such information. The filings with the SEC are hereby incorporated herein by reference and qualifies the presentation in its entirety. Cautionary Note to U.S. Investors The United States Securities and Exchange Commission permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. U.S. Investors are urged to consider closely the disclosure in our Form 10-K for the year ended December 31, 2010, available from us at Nine Greenway Plaza, Suite 300, Houston, Texas 77046. You can obtain these forms from the SEC by calling 1-800-SEC-0330.

W&T Offshore, Inc. (NYSE: WTI)

Nine Greenway Plaza Suite 300 Houston, TX 77046 Main line - 713-626-8525 Fax - 713-626-8527 Investor Relations - 713-297-8024 www.wtoffshore.com www.investorrelations@wtoffshore.com